Sliding yen: What’s going on with the Japanese currency?

• Japan was the first major country to lower interest rates to zero at the turn of the century.
• These nations are currently boosting their interest rates, while the Bank of Japan again kept its benchmark rate below zero on Friday.
• As a result, there is a decline in demand for currencies from nations with lower interest rates.

 Japan was the first major country to lower interest rates to zero at the turn of the century. Many other nations used same strategy to assist their economies during the Covid epidemic.

These nations are currently boosting their interest rates, while the Bank of Japan (BOJ) again kept its benchmark rate below zero on Friday. Additionally, that harms its currency.

Investors have historically purchased the yen during times of crisis because it is long regarded as a refuge currency.

However, that situation is currently precarious. Its value versus the US dollar has fallen by more than a fifth only this year alone, bringing it to its lowest point since 1990.

Why is this taking place?

The disparity between Japanese and US interest rates is what has caused the yen to decline.

In an effort to combat the rising cost of living, the US Federal Reserve has aggressively increased its key interest rate from 0.25% to 3.25% since March.

A currency typically becomes more appealing to investors when its interest rates are higher.

As a result, there is a decline in demand for currencies from nations with lower interest rates.

Economic stagnation

However, other experts think that the weak yen is an accurate reflection of the nation’s financial situation.

In the past three decades, the economy has rarely expanded. It also has the highest level of debt on the entire planet.

Japan also has the world’s lowest birth rate and the greatest percentage of elderly persons in its population, creating a demographic time bomb.

Even though the government has let some foreign workers assist in problem-solving, there is still fierce opposition to immigration.

A former consultant to billionaire investor George Soros Takeshi Fujimaki asserts, “There is no cause for the yen to strengthen.”

As he has previously predicted, he anticipates the Japanese yen to reach 180 versus the US dollar before eventually losing all of its value.

Also Read

Zelensky says Russia deploys hundreds of drones in only two days

According to President Volodymyr Zelensky, Russia has attacked Ukraine with drones more...